It's the 12th harmonic in comparison to the 12th fretted. If the fretted note is flat, the saddle needs to be closer to the neck. If it is sharp, the saddle needs moved away from the neck.

Also, you'll want to use new strings when setting intonation, and have the action adjusted to where you want it before intonating it. If you intonate, then adjust the action, you'll have to intonate again.

Not to beat a dead horse, but perhaps theres some confusion since there are three things going on: open, fretted, and harmonic. First tune the open string, like you said. Then you're checking the fretted note to see how much the string stretches to meet the fingerboard, and how much compensation you need at the saddle to compromise for this happening. The harmonic is just a substitute for the open string.

In the days before strobe tuners, with a good ear you could compare the harmonic (which is an octave over the open note, no matter what the bridge saddle compensation is set for) with the 12th fret note. Now with electronic tuners it's just as easy to tune the open string and check the fretted string without bothering with the harmonic.

By the way there is something magical about the 12th fret - because it's the way it's done. Reason being that any saddle compensation is a compromise and you cannot get perfect intonation over the entire fretboard, so the 12th is the most popular compromise and unless you have a Buzz Feiten ear, you probably don't want to venture out on your own using other frets to set your bridge saddles. Having said that, there are luthiers who tune the string while fretted at the third fret, and check the compensation at the 15th fret.

Not to beat a dead horse, but perhaps theres some confusion since there are three things going on: open, fretted, and harmonic. First tune the open string, like you said. Then you're checking the fretted note to see how much the string stretches to meet the fingerboard, and how much compensation you need at the saddle to compromise for this happening. The harmonic is just a substitute for the open string.

In the days before strobe tuners, with a good ear you could compare the harmonic (which is an octave over the open note, no matter what the bridge saddle compensation is set for) with the 12th fret note. Now with electronic tuners it's just as easy to tune the open string and check the fretted string without bothering with the harmonic.

By the way there is something magical about the 12th fret - because it's the way it's done. Reason being that any saddle compensation is a compromise and you cannot get perfect intonation over the entire fretboard, so the 12th is the most popular compromise and unless you have a Buzz Feiten ear, you probably don't want to venture out on your own using other frets to set your bridge saddles. Having said that, there are luthiers who tune the string while fretted at the third fret, and check the compensation at the 15th fret.

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+1, also, use the bridge pickup position. For some reason it gives a pure pitch when setting intonation.

1 set pickup to NECK position
2 roll tone setting to 0
3 sound open string and tune it using QUALITY tuner
4 fret 12th fret and see how sharp of flat it is with the tuner
5 adjust string as needed, sadle either forward or back
6 repeat step 3 through to 5
7 when open string and fretted 12th fret note are the same , you have done it
8 go to next string